A MONTHLY METER OF INDUSTRY TRENDS

OFFICE MARKET AT-A-GLANCE

There's hope on the horizon for the national office market. The vacancy rate for CBD office space dropped from 15.3% in the first quarter of 2003 to 14.1% in the second quarter. In addition, CBD leasing activity was up to 29 million sq. ft. from 17.6 million sq. ft. in the first quarter.

National Office Market Overview as of 2Q 2003

CBD

Non-CBD

Inventory (sq. ft.)

1.1 billion

1.7 billion

Vacancy Rate

14.1%

19.4%

Average Rental Rates

$26.48

$23.28

Leasing Activity (sq.ft.)

29.0 million

64.4 million

YTD Overall Absorption (sq. ft.)

-19.2 million

-16.5 million

YTD Investment Sales Activity (sq. ft.)

20.1 million

31.4 million

Source: Cushman & Wakefield

HOTEL DEVELOPMENT REBOUNDS

With the Iraqi offensive completed, the SARS scare ending and the upturn in the stock market, conditions seem ready to improve for the beleaguered hotel sector. And developers are ready to capitalize on an upswing. Case in point: the number of completed upscale hotel projects is expected to increase a whopping 74% between 2003 and 2004.

Scheduled Hotel Completions

2003 Projects

Rooms

2004 Projects

Rooms

Upscale

86

10,332

150

17,485

Midscale With Food & Beverage

44

3,362

42

3,586

Midscale Without Food & Beverage

261

21,425

304

25,981

Economy

93

6,243

78

6,227

Source: Lodging Econometrics

MULTIFAMILY JITTERS INCREASE

The national apartment market finished the second quarter with a 6.8% vacancy rate, its highest in a decade, reports Marcus & Millichap. But the volume of supply is moving in the right direction: Completions of apartment complexes have declined every year since 2001.

POSITIVE SIGNS OF JOB GROWTH

There are a few regions of the country that are actually experiencing job growth. The South has remained stable over the past year, while the West is even experiencing a slight up-tick in employment. Washington, D.C., with its focus on federal government, remains somewhat insulated from the rest of the nation's employment troubles.

Top Five MSAs for Job Growth

Metropolitan Statistical Area

Annual Job Growth

2000

2001

2002

2003

Washington, D.C.

4.9%

2.5%

-0.1%

1.0%

Riverside, Calif.

6.3%

4.7%

2.5%

1.8%

Las Vegas

5.7%

6.3%

-0.5%

2.1%

West Palm Beach, Fla.

4.1%

5.2%

1.1%

2.7%

Tampa, Fla.

5.6%

0.6%

0.2%

1.0%

National

2.6%

0.8%

-1.3%

-0.2%

Source: Census Bureau/Reappoint/GMAC Institutional Advisors

MAGNET MARKETS

Metros with a high diversity quotient, or that have a large senior population, are expected to grow the fastest over the next 25 years. Areas with a low diversity quotient are more likely to shrink.